Around the Peak.

The latest news, tips and information from us
here at Longs Peak.

Sort by Topics

GIPS Compliance

Investment Performance

Longs Peak News

Investment Performance

Investment Performance

What is the Sortino Ratio?

The Sortino Ratio is similar to the Sharpe Ratio as it is used to compare and rank managers with similar strategies. However, unlike Sharpe, the Sortino Ratio measures the incremental average strategy return over a minimum acceptable return per unit of downside risk rather than total risk. Because of this difference, the Sortino Ratio may […]
Investment Performance

Investment Performance and Risk Statistics

The recent market volatility probably has you wondering how your strategy has fared through this unprecedented time. Disruptive market environments tend to reveal critical information about active managers that help investors see those that truly add value, and those that don’t. So, what should you do to evaluate your actively-managed strategy and how can you […]
Investment Performance

What is the Sharpe Ratio?

The Sharpe Ratio is calculated as the strategy’s mean return minus the mean risk-free rate divided by the standard deviation of the strategy. The Sharpe Ratio measures the excess return for taking on additional risk. As one of the most popular performance appraisals measures, the Sharpe Ratio is used to compare and rank managers with […]
GIPS Compliance Investment Performance

Investment Performance Outlier Testing

For any firm that aggregates portfolios of the same strategy into a composite, or otherwise groups portfolios by mandate, how do you know that each portfolio truly follows that strategy? The answer is outlier testing. Why Utilize Composites? The GIPS standards require firms managing separate accounts to construct composites, which aggregate all discretionary portfolios of […]
Investment Performance

Arithmetic vs Geometric Mean: Which to use in Performance Appraisal

Most performance appraisal measures utilize a mean return in its calculation. This can be in the form a geometric mean or a simple arithmetic average. Because both types of means can be used, it raises the question: Which measure should be applied? When calculating performance, we are accustomed to calculating returns geometrically (i.e., including compounding). […]
GIPS Compliance Investment Performance

How to Construct Composites

GIPS compliant firms are required to calculate and present composite performance, rather than presenting the performance of a model or single representative account. The purpose of this is to ensure investment managers are presenting an accurate representation of their ability to implement a strategy, rather than “cherry-picking” their best performing portfolio. As discussed in our […]
GIPS Compliance Investment Performance

Are fee-related admin issues causing errors in your investment performance?

Calculating gross and net investment performance should be simple, right? Yes, however, firms often face fee-related portfolio accounting or administrative issues that cause complications, resulting in inaccurate performance. It is essential that all types of fees are accounted for correctly to ensure reported performance can be relied upon and properly evaluated by clients and prospective […]